The web has created an unlimited potential for communication, purchasing, and yes, even lending. The startup will never be the same, as more and more online lenders arise and the approval process continues to evolve. What is online lending? How does it help startups?
Online Lending Is Simple
Most online lending is just about the same as a traditional bank loan. You’ll fill out an application and depending on factors such as your FICO score and annual income, you’ll receive an approval within a few days.
This process saves the hassle of going into a bank and applying for a loan, however, when you’re applying with an online lender, it’s important to remember to be cautious and always do your research first. Unfortunately, not every company on the web is who they claim to be, and online lending can be an effective avenue for fraud.
That’s not to say that online lenders are untrustworthy, it’s simply important to be aware of who you’re borrowing from and what the loan terms and conditions are. If you notice any red flags such as unusually high-interest rates, terms that are not well defined or are very confusing, or the company has very poor reviews, you may want to look elsewhere.
Online Lenders Are Usually Quicker
The approval process through a traditional bank can usually take a few business days up to a week in some cases. With online lenders, the process is usually much quicker, with some turnarounds occurring within twenty-four hours of the application submission.
What Does Your Startup Need?
Your first consideration when shopping for an online lender should be your startup’s needs. This can include any construction or rental costs, supplies and equipment, marketing, and more. It’s always a good idea to budget out as many things as you can think of before going to apply for a loan.
Once you’ve got your startup costs budgeted, you’ll need to consider the direction of the company and whether or not you’ll need a financial safety net for the first few months (which you likely will).
On average, a startup will not become “profitable” until about four or five years into the venture. This means that you’ll want to have a financial plan in place so that your business doesn’t go under in the first year. You can set aside some of your startup money in a rainy day fund so to speak, for when business is slow or it needs some improvements.
The Changing Face Of Lending
Upstart is an online lending platform that was founded by ex-Google employees. While at first glance the company may look like just another online lender, they have revolutionized online lending by becoming the first company to utilize AI in their lending process.
The AI learns and adapts, taking into consideration more than just your FICO score when you apply for a loan. Your job and education history, as well as other factors, are taken into consideration as well, making the Upstart model the smartest lending process in the industry.
Upstart claims to have 75% fewer defaults on loans and a 173% higher approval rating than traditional banks. By the end of 2018, 60% of the company’s lending process was completely automated, paving the way for a completely new way of lending money.
The company believes that within about a decade, almost all lending will be automated, so you’re likely to run into this process at some point. The company maintains one of the highest customer service ratings in the industry, and with much higher approval ratings and an intelligent lending system, it’s easy to see why.
The company has a strong belief that lending should be simple and factor in more than just a credit score. With continued excellence in service and a great financial product, Upstart is well on its way to becoming the number one online lender. You can go here forto see what the customers have to say about this great brand.
A New Era For Startups
With online lending, securing funds has never been quicker or easier for startups. There are literally thousands of lenders, and most traditional banks are connected to the online marketplace in one way or another.
In the changing business landscape, it’s important for lenders to evolve alongside the business world. Online lending has done just that. By providing a secure and efficient lending system, the traditional lending process is no longer intimidating or off-putting; and with the addition of AI to the lending system, you can find approval much less biased and more centered on your skills and abilities.
Remember: The Best Lenders Have Credentials
Borrowing money carries a lot of weight along with it. If you choose a bad lender, you can end up with ridiculously high late fees and interest rates, a hit to your credit score, or other damages that will only serve to postpone your startup plans.
The best lenders have credentials, and in the online world, these are more important than ever. Be sure the company you choose to borrow from already has a customer base (preferably one that leaves reviews) and is FDIC insured.
With new technology and an evolving credit world, traditional lending will never be the same. You can start the company of your dreams in as little as twenty-four hours! Remember that a loan is only valid once you’ve signed the paperwork and received the money. If something feels wrong, it probably is! Stay wary, and use only trusted companies for your lending needs.
Founder Dinis Guarda
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